1. Department of Energy Regulatory & Energy Star Changes

2. Key Messages

3. Rinnai Meets All Efficiency Standards
.96
.82
.82
Since Rinnai tankless units already meet the minimum DOE standards of .82, this change does not impact our current Rinnai product offering
Every Rinnai Tankless Water Heater Already Meets New DOE Requirements

4. Rinnai TWH vs. Tank Efficiency
.82
.70
No longer ENERGY STAR® qualified
ENERGY STAR® qualified
ENERGY STAR® will create a separate category for TWH and require all TWH to be .90 to receive ENERGY STAR® qualification
ENERGY STAR® states that this will have less than a 2% impact on sales
All Rinnai Ultra Series Condensing Water Heaters will be ENERGY STAR® Qualified
Non-Condensing will no longer be ENERGY STAR® qualified ---- yet will have a higher energy efficiency rating than an ENERGY STAR® qualified tank - 18% more efficient then the minimum tank requirement
Every Rinnai Tankless Is Still More Efficient Than A Tank

5. Size Impact Tank To Tankless Conversation Opportunity –
In order to increase energy efficiency, gallon tank water heaters will likely increase in diameter, in some cases 2” or more, to accommodate more insulation to reach the higher required efficiencies. In space constrained applications where a 50 gallon tank is being replaced, it may be necessary to downsize to a 40 gallon tank because the larger 50 gallon tank may not fit. Rinnai’s already sleek design is not impacted by the new regulations and Rinnai’s compact design makes it possible to locate the unit in many locations, including places where new, larger tanks won’t fit!
Tank To Tankless Conversation Opportunity –
Especially In Space Constrained Replacement Opportunities

6. Tanks - Significant price increases
Rinnai
No price increase
Closing the gap on cost
of tank vs tankless
Tanks - Significant price increases
Tank costs will increase significantly – in fact some manufacturers have already announced price increases in the 14-25% range. This will give the more compact Rinnai tankless water heaters increased opportunity to displace tanks and narrow product cost deltas
Gas tanks above 55 gallons need to go to condensing technology. This requires an electrical outlet, new venting, as well as a condensate line. The overall cost to install will rise dramatically – over 300% to the consumer
Electric tanks above 55 gallon will become heat pump technology
Tank to tankless conversion accelerates. There is no longer a price difference with large water users.

7. Improve Home Values with HERS and LEED Ratings
HERS & LEED Benefits
Tankless Water heaters improve HERS and LEED Ratings due to increased energy and water efficiency
LEED, or Leadership in Energy & Environmental Design, is a green building certification program that recognizes best-in-class building strategies and practices. To receive LEED certification, building projects satisfy prerequisites and earn points to achieve different levels of certification. Prerequisites and credits differ for each rating system, and teams choose the best fit for their project.
The Home Energy Rating System (HERS) Index is the industry by which a home's energy efficiency is measured. It’s also the nationally recognized system for inspecting and calculating a home's energy performance.
Improve Home Values with HERS and LEED Ratings

8. The Rest Of The Country Generally Follows California’s Lead.
Title 24 - California
Title 24 regulates and governs the design and construction of buildings in California concerning Electrical, Mechanical, and Plumbing codes.
Mandated Requirements for New Construction:
A 120V electrical receptacle that is within 3 feet from the water heater
A Category III or IV vent, or a Type B vent with straight pipe between the outside termination and the space where the water heater is installed
A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance
A gas supply line with a capacity of at least 200,000 Btu/hr
Title 24 Mandates Several Requirements That Make The Tankless Installation Easier Because The Location Is Prepared For High Efficiency Products – Approx. 70% Of The Install Cost Already Done!
The Rest Of The Country Generally Follows California’s Lead.

9. Standards & Policy Changes Summary

10. Department of Energy Changes
Changes take effect April 16, 2015
New energy efficiency mandates will require higher Energy Factor (EF) ratings on most all residential gas, electric, oil and tankless gas water heaters.
The changes will have an impact not only on how they will need to be manufactured but also on how and where they can be installed.

11. DOE Impact to Rinnai - Gas
Gas Storage Water Heaters
Volume
Current Federal Minimum
Federal Minimum from 2015
114L （30gal)
.61
.63
151L （40gal)
.59
.62
190L （50gal)
.58
.60
246L （65gal)
.55
.75
284L （75gal)
.53
.74
Since Rinnai tankless units already meet the minimum standards of .82, this change will have no direct impact on the Rinnai offering.
With the gallon storage tanks most likely increasing in diameter, in some cases 2” or more, this will give Rinnai compact tankless water heaters increased opportunity to displace more tanks.
This will also increase the cost to manufacture the storage tank (estimated at $20-$50), narrowing the cost delta between tank and tankless.
With tanks above 55 gallons needing to go to condensing technology combined with the need to install an electrical outlet, new venting as well as a condensate line, overall cost to install will rise dramatically….a great opportunity for tankless!
As a point of reference on the size of the opportunity, in 2013 there were 188,000 residential storage tanks larger than 55 gallons sold.
Gas Tankless Water Heaters
Current Federal Minimum
0.62
Federal Minimum from 2015
0.82
Source(s): Charts (DOE) / Sales data (2013 BRG)

12. DOE Impact to Rinnai - Electric
Similar to gas storage tanks, gallon electric storage tanks most likely increasing in diameter, this should give Rinnai compact tankless water heaters increased opportunity to displace more tanks.
With the minimums nearly doubling, forcing a shift to heat pump technology, the opportunities for the more economical tankless water heaters will grow.
The option of going to (2) 40 gallon storage tanks to meet the demand would also play favorably into the more economical tankless water heater solution.
Again as a point of reference, in 2013 there were 265,000 residential electric tanks larger than 50 gallons sold.
Source(s): Sales data (2013 BRG) / Charts (DOE)

13. Energy Star 3.0 Changes Changes take effect April 16, 2015
Per their “Guiding Principles”, Energy Star is revising their criteria in response to DOE changes in the Federal minimum efficiency standards.

14. Energy Star Changes
Electric Storage
Gas Storage
Gas Tankless

15. Energy Star Timeline January 1, 2015 April 16, 2015
All new product submittals will need to meet Version 3.0 requirements to qualify for an Energy Star rating.
Products certified/listed prior to this date can be listed utilizing the ENERGY STAR Version 2.0 requirements and can continue to bear the ENERGY STAR logo until April 15, 2015.
April 16, 2015
Any product manufactured and labeled ENERGY STAR must be certified to the Version 3.0 requirements.
Due to the increase to a .90 standard, Rinnai will discontinue use of the Energy Star logo on non-condensing product by this date.
Any product manufactured prior to April 16, 2015 that bears the ES2.0 logo can still be sold until depletion.

16. ES3.0 Impact to Rinnai
Similar to the changes being made by the DOE, the increased standards for Energy Star for both the electric and gas storage tank water heaters should lead to increased opportunities for the more compact, more efficient tankless water heaters.
This will most likely accelerate the growing trend towards the tankless condensing technology.
Confusion in the marketplace? With the increase of the TWH minimum to .90 to receive an Energy Star rating, our non-condensing units will no longer bear the Energy Star logo, even though these units are still significantly more efficient than a gallon storage tank that WILL bear an Energy Star logo!
Rinnai and its energy company partners will be reviewing how to best combat this “misconception” and reposition ourselves accordingly.
“EVERY TANKLESS IS STILL MORE EFFICIENT THAN A BASE Energy Star 3.0 TANK”

17. Title 24 Changes
The California Code of Regulations (CCR) “Title 24” references state regulations that govern the design and construction of buildings and facilities as well as energy conservation.
2013 standards went into effect on July 1, 2014

18. Title 24 Impact to Rinnai
The use of Rinnai tankless water heaters is a great option to meet the overall Title 24 energy compliance needs.
Rinnai’s Circ-Logic, when used in conjunction with an “on-demand” system, is seen by 2013 T24 standards as the most efficient method of recirculation. In many cases the use of tankless water heaters actually helps make up the energy “hit” incurred by using recirculation.
The 2013 edition of Title 24 eliminates several market barriers by ensuring the water heater installation location is prepared for high efficiency water heating products. This reduces the difference between standard and high efficiency installations and should make the retrofit to high efficiency products much easier.